United States Court of Appeals
For the First Circuit
No. 03-1596
SUPERMERCADOS ECONO, INC.,
Plaintiff, Appellant,
v.
INTEGRAND ASSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jay A. García-Gregory, U.S. District Judge]
Before
Torruella, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
Enrique Peral-Soler, with whom Muñoz Boneta Benítez Peral &
Brugueras were on brief, for appellant.
Rafael J. Velázquez-Villares, with whom Cobián & Valls, were
on brief, for appellee.
July 7, 2004
TORRUELLA, Circuit Judge. Plaintiff-appellant
Supermercados Econo ("Econo") appeals the district court's
dismissal of its flood insurance money recovery claim against
defendant-appellee Integrand Assurance Co. ("Integrand"). The
district court found that Econo failed to comply with the
requirement of the Standard Flood Insurance Policy ("SFIP") that a
sworn proof of loss be submitted within sixty days after a flood
loss. Econo does not contest this holding but argues instead that
the case should be remanded to the district court for consideration
of Econo's claim as a loss payee. As the findings of fact and
conclusions of law in the district court's order and opinion do not
permit meaningful appellate review, we vacate the judgment and
remand to the district court with directions to address Econo's
loss payee claim in compliance with Federal Rule of Civil Procedure
52(a).
I. Background
We briefly summarize the relevant facts as found by the
district court. In August 1994, Integrand issued a flood insurance
policy to Atlantic Cold Storage, Inc. ("Atlantic") under the
National Flood Insurance Program ("NFIP"), covering the risk of
loss of property and perishable items stored in the Bechara
Industrial Park. In September 1994, Atlantic entered into an
agreement with Econo for the storage of Econo's goods. On
September 23, 1994, in response to a request from Atlantic's
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insurance broker, Integrand issued an endorsement to Atlantic's
policy including Econo as an additional insured and loss payee.
On September 10, 1996, Hurricane Hortense's rains flooded
the Bechara warehouse, damaging all stored merchandise. On
November 14, 1996, Econo sent Integrand a letter informing
Integrand that Econo suffered the loss of all goods stored at
Atlantic's facilities, estimating the inventory's value at
$131,423.54. On November 19, Atlantic filed a signed and sworn
proof of loss with Integrand, which did not include the loss
suffered by Econo. On December 12, 1996, Integrand issued a check
payable to Atlantic in the amount of $250,144. The check did not
include Econo as a payee, and Atlantic did not disburse any payment
to Econo from these funds.
On December 4, 1997, Econo filed a complaint seeking
compensation for insured property losses and monetary damages
against Integrand, Atlantic, Atlantic's owner, president, and
principal shareholder, Ernesto Cabezas ("Cabezas"), and Atlantic's
insurance agent, Colonial Insurance Agency, Inc. ("Colonial"),
pursuant to the National Flood Insurance Act of 1968 ("NFIA"), 42
U.S.C. § 4001 et seq., and Puerto Rico law. Econo and Colonial
settled their claims and partial judgment was entered on July 12,
2000, dismissing the action against Colonial. After a bench trial
on June 24, 2002, the district court ordered the parties to submit
proposed findings of fact and conclusions of law.
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On February 28, 2003, the district court dismissed
Econo's claims against Integrand for failure to comply with the
SFIP's requirement that a sworn proof of loss be submitted within
sixty days of a flood loss and because Econo's merchandise
constituted bailee goods excluded from the SFIP's coverage. On the
basis of default judgments entered against Atlantic and Cabezas,
the district court granted Econo's negligence claims for failure to
safeguard Econo's goods and found Atlantic and Cabezas jointly
liable for the value of the damaged merchandise, $131,423.54. This
appeal followed, in which Econo contends that the district court
erred by failing to make findings of fact and conclusions of law,
as required by Rule 52(a), regarding Econo's claim that, as a loss
payee under the flood policy, Econo should have been included as a
payee in the payment of any claim to Atlantic by Integrand.1
II. Analysis
Rule 52(a) provides that "[i]n all actions tried upon the
facts without a jury . . ., the court shall find the facts
specially and state separately its conclusions of law thereon."
Fed. R. Civ. P. 52(a). "The requirements of Rule 52(a) are
intended to assure that the district court gives appropriate
1
A loss payee is a "person or entity named in an insurance policy
. . . to be paid if the insured property suffers a loss." Black's
Law Dictionary 958 (7th ed. 1999). Econo thus argues that when
Integrand accepted and paid Atlantic's claim, Econo should have
been included as a loss payee, regardless of the failure of its
claim as an additional insured.
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consideration to all essential relevant factors and provides an
adequate basis for meaningful appellate review of its decision."
TEC Eng'g Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 545
(1st Cir. 1996)(citing 9A Wright & Miller, Federal Practice and
Procedure, § 2571, at 478-80 (2d ed. 1994)). We have previously
noted that while "it is of vital importance that the court
scrupulously follow the requirements of Rule 52(a), . . . [t]he
burden is not a heavy one. 'The judge need only make brief,
definite, pertinent findings and conclusions upon the contested
matters.'" In re Rare Coin Galleries of Am., Inc., 862 F.2d 896,
900 (1st Cir. 1988)(quoting Fed. R. Civ. P. 52(a) Advisory
Committee Note (1946 Amendment)). We may even overlook the absence
of Rule 52(a) findings and conclusions "if our own review of the
record substantially eliminates all reasonable doubt as to the
basis of the district court's decision." TEC Eng'g Corp., 82 F.3d
at 545 (citations omitted). Nonetheless, when "the absence of any
subsidiary findings of fact or conclusions of law renders it
virtually impossible for this court to do anything but speculate as
to the basis of the district court's ruling," we are unable to
engage in meaningful appellate review and must remand to the
district court. Id. (citations omitted).
The district court made no conclusions of law regarding
Econo's claim as a loss payee. The district court did indeed find
that Econo's claim as an additional insured must fail because Econo
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failed to comply with the SFIP requirement of a signed and sworn
proof of loss within sixty days and because the merchandise stored
by Econo constituted bailee goods excluded from the SFIP's
coverage. Econo does not dispute these determinations but argues
that the SFIP's exclusion of bailee goods has no bearing on its
claim as a loss payee, because a loss payee is merely a party
designated to be included in the payment of the successful claim of
the named insured, in this case Atlantic. The district court
opinion does not indicate on what basis, legal or factual, Econo's
loss payee claim was rejected; it simply ignores the issue
altogether.
Integrand directs our attention to precedent suggesting
that "appellate tribunals should not stand unduly on ceremony, but
should fill in the blanks in the district court's account when the
record and the circumstances permit this to be done without short-
changing the parties." Vecinos de Barrio Uno v. City of Holyoke,
72 F.3d 973, 989 (1st Cir. 1995)(citing Applewood Landscape &
Nursery Co. v. Hollingsworth, 884 F.2d 1502, 1503-04 (1st Cir.
1989)). Even when specific findings are lacking, Integrand reminds
us, appellate review is not necessarily precluded, and we may
proceed "view[ing] the record in the light most favorable to the
ruling [and] making all reasonably supported inferences." Arthur
D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 49 (1st Cir.
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1998)(quoting Roche v. Royal Bank of Canada, 109 F.3d 820, 821 (1st
Cir. 1997)).
To review the district court opinion as to the loss payee
claim, however, even in the light most favorable to the implicit
rejection of the loss payee claim, would require us to infer the
conclusions of law as well as the factual basis of those
conclusions. "As we have stressed repeatedly in the past, the Rule
52(a) requirements that facts be stated specially, and conclusions
of law separately, impose on the trial court an obligation to
ensure that its ratio decidendi is set forth with enough clarity to
enable a reviewing court reliably to perform its function; namely,
to review the conclusions of law de novo and the essential findings
of fact for clear error." Touch v. Master Unit Die Prods., Inc.,
43 F.3d 754, 759 (1st Cir. 1995)(collecting cases). The district
court's opinion does not afford us this opportunity. We must again
"emphasize that appellate review is utterly impracticable when
neither the conclusions of law which guided the district court
ruling, nor the findings of fact essential to a principled decision
under the applicable law, are discernible from its decision." Id.
Integrand argues that the loss payee claim was not a
contested matter before the district court and thus did not require
Rule 52(a) findings and conclusions. To support this contention,
Integrand argues that Econo's "mention" of the loss payee status
does not establish a controversy between the parties. As Integrand
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concedes, however, Econo listed in the Ultimate Facts to be
Disputed section of the Pretrial Order "[t]he validity and
enforceability of the additional insured and loss payee
endorsements, in full force and effect from 1994 to 1996 inclusive,
issued to Econo and if it afforded coverage to Econo's property
. . . under its contents coverage section." Additionally, Econo's
status as an additional insured and loss payee was discussed
repeatedly at trial. Econo's counsel elicited specific testimony
on the loss payee claim from the manager of Integrand's Flood
Insurance Department, Freddie Acevedo-Toledo, in the following
manner:
Q. Isn't it true, Mr. Acevedo, that as a loss
payee under a policy such as the one in
this case, any payments made for a claim
under that policy have to include as a
payee Econo Supermarkets, Inc.?
A: Correct.
Thus, we find that Econo's loss payee claim was a contested matter
triggering the district court's duties under Rule 52(a).
Integrand also puts forth a series of substantive
arguments regarding the validity of Econo's loss payee claim.
Integrand argues, inter alia, that the claim is barred because
Econo did not comply with all the requirements of the SFIP and
that the policy in its entirety was null and void due to alleged
misrepresentation by Atlantic regarding the warehouse's ownership.
The merits of these assertions and their relevance to the
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disposition of Econo's loss payee claim are properly left to the
district court on remand.
Integrand's final argument is that Econo's failure to
file a Rule 52(b) motion in the district court precludes Econo from
challenging the district court's compliance with Rule 52(a) on
appeal. Rule 52(b) provides that "[o]n a party's motion filed no
later than 10 days after entry of judgment, the court may amend its
findings -- or make additional findings -- and may amend the
judgment accordingly." Fed. R. Civ. P. 52(b). While "[a]ppeals
based on the insufficiency of the findings should not be overused
as substitutes for motions to amend findings," 9A Wright & Miller,
Federal Practice and Procedure § 2582 (2d ed. Supp. 2003), failure
to file such a motion in the district court does not preclude
appeal. See, e.g., Touch, 43 F.3d at 759 (noting that "neither
party sought reconsideration under Rule 52(a)"). Nevertheless, we
emphasize again, as we have before, that "although all
responsibility under Rule 52(a) rests with the trial judge, . . .
counsel might have avoided the unnecessary expense and delay
occasioned in this case simply by submitting a timely request for
reconsideration based on the need for adequate findings of fact and
conclusions of law as required by Rule 52(a)." Id.
In vacating and remanding for further findings and
conclusions in compliance with Rule 52(a), we do not disturb our
precedent indicating that "the district court was not required to
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make findings on every detail, was not required to discuss all of
the evidence that supports each of the findings made, and was not
required to respond individually to each evidentiary or factual
contention made by the losing side." Addamax Corp. v. Open
Software Foundation, Inc., 152 F.3d 48, 55 (1st Cir. 1998)
(citations omitted). "As long as the trial court clearly relates
the findings of fact upon which its decision rests and articulates
in a readily intelligible manner the conclusions that it draws by
applying the controlling law to the facts as found, no more is
exigible." Sierra Fría Corp. v. Donald J. Evans, P.C., 127 F.3d
175, 180 (1st Cir. 1997)(citing Peckham v. Continental Cas. Ins.
Co., 895 F.2d 830, 842 (1st Cir. 1990)). While "[t]here is no
mechanical rule for determining the exact level of findings
required by Rule 52(a)," Addamax Corp., 152 F.3d 4 at 55, we find
that the district court's failure to provide any indication of the
legal or factual basis of its disposition of Econo's loss payee
claim precludes meaningful appellate review.
III. Conclusion
We vacate the judgment and remand to the district court
for further findings of fact and conclusions of law as required by
Rule 52(a). In doing so, we do not express any opinion as to the
merits and the district court may alter or maintain the ultimate
resolution of the case.
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The judgment of the district court is vacated and the
case is remanded for further proceedings consistent with this
opinion.
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